Car Dealerships in Harare Identified as Top Money-Laundering Risk, FIU Warns

Zimbabwe’s FIU warns Harare car dealerships pose the country’s highest money-laundering risk (image source)

The Reserve Bank of Zimbabwe’s Financial Intelligence Unit (FIU) has sounded the alarm over Harare’s car dealerships, naming them the country’s most exposed sector to money laundering. According to its latest National Risk Assessment (NRA), covering November 2023 to November 2024, the automobile trade now surpasses real estate and gold in vulnerability, becoming a central channel for illicit financial flows worth billions of dollars.

FIU Director General Oliver Chiperesa described the findings as “a wake-up call,” pointing to the sector’s reliance on cash transactions, largely in U.S. dollars, and weak oversight as the main factors behind its risk rating. “Cash-based car trading is feeding into criminal ecosystems, undermining financial stability and eroding tax revenues,” he said.

Key Findings: Billions Laundered Through Car Sales

The FIU report revealed that car dealerships were the only sector rated “high risk” across all categories of threat, vulnerability, and exposure. Some 95 percent of dealers sampled were found to import vehicles and transact entirely in cash, often without proper licenses. Zimbabwe’s vehicle fleet grew by 25 percent between 2019 and 2023 — from 1.23 million to 1.6 million cars. This surge has coincided with what the FIU estimates to be US$6.15 billion in illicit funds laundered through car sales over the same period, equivalent to 3.4 percent of GDP.

The sources of dirty money flowing into the trade include:

• Smuggling (US$920 million)

• Illegal gold and metals trading (US$880 million)

• Corruption (US$730 million)

• Fraud (US$500 million)

• Tax evasion (US$300 million)

Drug trafficking and illicit diamond sales also added to the sector’s dirty-cash profile.

Wider Risk Landscape

Beyond car dealerships, real estate agents and precious metal traders were ranked as “medium-high risk” due to their cash intensity. Banks, however, received a “medium” risk rating, supported by stronger compliance frameworks and the spread of electronic payments. Yet, gaps remain in corporate and trade-finance channels where compliance resources remain thin.

Regulatory Response and Strategy

The FIU is now working with Parliament and the Ministry of Finance on reforms that include:

• Mandatory licensing and registration of dealerships.

• Requiring electronic transactions for sales above US$5,000.

• Stricter record-keeping on vehicle imports and sales.

• Targeted audits and expanded intelligence-sharing across borders.

• Launch of a 2025–2029 Anti-Money Laundering Strategy prioritizing the car trade.

“The NRA is not just a diagnostic tool,” Chiperesa emphasized. “It will directly guide policy, legislation, and enforcement to close loopholes.”

Pushback From Industry Players

While regulators move to tighten oversight, some dealers fear that abrupt changes could harm an already fragile industry. With the auto trade supporting more than 50,000 jobs in sales, spare parts, and maintenance, associations argue reforms must be gradual.

“We are not opposed to compliance, but reforms must be phased and accompanied by technical support,” one Harare-based dealer told the Southerton Business Times. Proposals from industry groups include hybrid cash-electronic transition models, government-backed digital infrastructure for car marts, and training workshops on compliance.

Regional Lessons and Best Practices

Zimbabwe’s challenge mirrors that of other emerging economies, where vehicles are often purchased in cash as a hedge against volatile currencies. The FIU has pointed to South Africa and Kenya as examples of best practice, where dealer registries, risk-based supervision, and public-private partnerships have tightened controls.

Looking Ahead

Analysts warn that progress will not be immediate. Success depends on expanding digital payment systems, balancing strict enforcement with economic realities, and enhancing collaboration among regulators, customs, and law enforcement. Ultimately, Chiperesa argued, the crackdown on dirty money in Harare’s car dealerships is not just about stopping crime but also about protecting the wider economy. “We must safeguard legitimate businesses and align with international anti-financial-crime standards,” he said.